P25-31B Making outsourcing decisions Cold Sports manufactures snowboards. Its cost of making 2,000 bindings is as follows: Direct materials $ 17,510 Direct labor 2,600 Variable overhead 2,060 Fixed overhead 7,000 Total manufacturing costs for 2,000 bindings $29,170 Suppose Topnotch will sell bindings to Cold Sports for $15 each. Cold Sports would pay $3 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.50 per binding. Requirements 1. Cold Sports's accountants predict that purchasing the bindings from Topnotch will enable the company to avoid $2,300 of fixed overhead. Prepare an analysis to show whether Cold Sports should make or buy the bindings. $(12,530) 2. The facilities freed by purchasing bindings from Topnotch can be used to manufacture another product that will contribute $3,100 to profit. Total fixed costs will be the same as if Cold Sports had produced the bindings. Show which alternative makes the best use of Cold Sports's facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.